The San Juan Daily Star
Dow, S&P 500 weighed down by Disney; PacWest leads regional banks lower
The Dow and the S&P 500 fell on Thursday, pressured by a drop in Disney shares after the company reported a fall in subscriber growth, while PacWest’s latest woes sparked another rout in the regional banking sector.
Walt Disney Co slid 7.9% and was the biggest loser on the benchmark S&P 500 index, following its quarterly report on Wednesday.
PacWest Bancorp plunged 25% after it reported a drop in deposits last week and pledged an additional $5.1 billion of its loans to the central bank.
The KBW Regional Banking Index slid 1.4% and was on track for a fourth straight day of loss.
The index, which is down 32% this year, has witnessed a series of volatile sessions since March due to the banking crisis, which has led to the collapse of three regional lenders.
The U.S. Federal Deposit Insurance Corporation’s (FDIC) said around 113 of the country’s largest lenders will bear the cost of replenishing the $16 billion hit that the agency has taken due to the crisis.
The banking sector worries overshadowed data that showed U.S. jobless claims jumped to a 1-1/2-year high last week, pointing to widening cracks in the labor market, which together with subsiding inflation could allow the Federal Reserve to halt further interest rate increases next month.
The reports provided further evidence that the economy was losing steam.
“There is an increasing sense that interest rates are going to be lower later this year. Without the debt ceiling uncertainty, the market would be moving to new highs,” said David Russell, vice president of market intelligence at TradeStation.
Markets are keenly watching for any updates on raising the United States’ $31.4 trillion debt ceiling, as the country races to avert an unprecedented default.
“The fact is, nobody really knows what to make of it. The American sovereign debt is intermeshed throughout our entire financial system, so it is really impossible to know what will happen in the case of a default,” Russell added.
U.S. Treasury Secretary Janet Yellen urged Congress to raise the federal debt limit and warned that a default could have severe repercussions on the global economy.
At 12:20 p.m. ET, the Dow Jones Industrial Average was down 253.51 points, or 0.76%, at 33,277.82, the S&P 500 was down 11.99 points, or 0.29%, at 4,125.65, and the Nasdaq Composite was up 9.68 points, or 0.08%, at 12,316.12.
The Nasdaq was boosted by a 5% rise in shares of Alphabet Inc after Google rolled out more artificial intelligence products on Wednesday to take on competition from Microsoft Corp.
The S&P 500 communication services index, housing the stock, rose 2.1% and hit a near nine-month high and among rare gainers on the day.
Tapestry Inc jumped 8.6% as it raised its annual profit forecast.
Declining issues outnumbered advancers for a 2.76-to-1 ratio on the NYSE and for a 1.85-to-1 ratio on the Nasdaq.
The S&P index recorded four new 52-week highs and 13 new lows, while the Nasdaq recorded 48 new highs and 161 new lows.